Lessons from the Red Queen: Rethinking Marketing

1. CHAPTER 10 LESSONS FORM THE RED QUEEN Rethinking Marketing, 1st Edition

2. Learning Objectives • Describe the Red Queen Effect and its implications for today’s marketers • Explain the relationship of specific competitors in today’s market in terms of co-opetition • Define crafting an entrepreneurial strategy • Describe the five strategies for escaping the Red Queen Effect Rethinking Marketing, 1st Edition

3. The Red Queen Effect • Red Queen Race • Relentlessly run faster and faster, never stopping • Red Queen seems to be perpetually running and yet the faster she runs, the more she tends to stay in one place relative to other fast-moving and uncertain activities in her environment Rethinking Marketing, 1st Edition

4. Red Queen Effect can be especially deleterious when new rivals enter the market • Incumbents struggle to improve efficiencies • Upstarts and new entrants in existing markets • Capture a niche • Create new ones • Rules of the games were changed irrevocably Rethinking Marketing, 1st Edition

5. Marketers must continually evolve • To create change • To respond to change • MP3s entered the music industry • Peer-to-peer file sharing threatened the marketplace • Along came Apple, a computer company Not one music industry exec foresaw this move! Rethinking Marketing, 1st Edition

6. Crafting a Strategy Is an Exercise in Entrepreneurship • What is strategy? • A plan • A concept • A course of action • Some idea of a direction in which to proceed • Ends, means, ways • Manage the present • Creating the future • Provides direction • Risky Rethinking Marketing, 1st Edition

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8. Strategist attempts to create strategic degrees of freedom and mitigate risk by balancing (Table 10-1) • Objectives sought (ends) • Methods to pursue objectives (ways) • Resources available (means) • Objectives must be SMART • Specific • Measurable • Achievable • Realistic • Time-stamped Rethinking Marketing, 1st Edition

9. Three overarching objectives of strategy • Create value (why) • Why question of strategy requires a balance between • Shareholder interests • Those of other stakeholders • Avert imitation (how) • Preventing imitation by others and confers a competitive advantage through • Differentiation • Core competencies • Other mechanisms Rethinking Marketing, 1st Edition

10. Determine size and scope ambitions (what) • Related to two fundamental concerns • The mission or purpose of the organization (what business are we in) • Firm’s position in the value network of the industry Rethinking Marketing, 1st Edition

11. 1980s Watchwords in Strategy • Portfolio planning • The experience curve • Porter’s five forces • Porter’s three generic strategies competitive advantages are derived from • Differentiation • Cost leadership • Focus (cost/differentiation) • SWOT analysis Rethinking Marketing, 1st Edition

12. Strategy formulation represented a conscious act of formulating • A strategy (thinking first) • Then implementing it (by acting) using • Factual data • Extrapolating from historical trends • Everyone gets dragged into the war of attrition • Cycle of differentiation and price fluctuation continues until • A competitor attains • Exclusive point of differentiation that is • Difficult to copy • New product is introduced Rethinking Marketing, 1st Edition

13. In the 1990s the Strategic Landscape Changed Dramatically • With the onset of • Increased turbulence • Hypercompetition • Radical innovations • New technologies • Evolution of the Internet and other related technologies • Increased globalization Rethinking Marketing, 1st Edition

14. New wave of tools and perspectives dominated strategy • Total quality management • Reengineering • Core competence • Competing on capabilities • Resource leveraging • Learning organizations • Innovation • Business models • A company is a collection of tangible and intangible resources (assets and capabilities) • Resources do not only refer to money and people, but cover a wide range Rethinking Marketing, 1st Edition

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16. Strategic imperative of a firm is sustained, superior financial performance (Table 10-2) • SCA-sustainable competitive advantage • If PROFIT • Physical resources • Relational resources • Organizational recourses • Financial resources • Intellectual and human resources • Technological resources • Are VRIO • Valuable • Rare • Inimitable • Organized for exploitation • Then competitive advantage • Is sustainable Rethinking Marketing, 1st Edition

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18. Conventional strategy making is • Inconsistent with discontinuities that • Have taken place • Are taking place • Traditional marketer considers • Existing resources when planning strategies that will • Conserve resources • Maximize use of these resources • Entrepreneurial world of strategy • The marketer looks for • Opportunities (ways) • Searches for resources (means) • In pursuit of these opportunities (ends) Rethinking Marketing, 1st Edition

19. Coping in a rapidly changing world requires • Increased flexibility • An ability to reduce uncertainty • Rapid experimentation • An ability to improvise • Companies that are locked in a Red Queen Race must • Radically change their business model to stay ahead • Discovering new ideas • Relentless innovation • Co-evolving collaboratively • Anticipating what customers want • Anticipating what competitors might do Rethinking Marketing, 1st Edition

20. Revolutionary thinking enables organizations to • Use novel insights to create successful innovations • Lead to early discovery of patterns that secure first-mover advantages • Topsight (i.e., the ability to see the whole system) • Foresight • Entrepreneurial action with a strategic perspective • Strategic action with an entrepreneurial mindset • Integration of entrepreneurial (i.e., opportunity-seeking) perspectives • Strategic (i.e., advantage-seeking) perspectives • Developing and taking actions designed to create wealth Rethinking Marketing, 1st Edition

21. Escaping the Red Queen Effect: Five Lessons • The only way out of the Red Queen's Race • Run a different one • Play another game • Know when to break the rules • Know when to bend the rules • Know when to follow the rules • Most importantly, know when to change the rules Rethinking Marketing, 1st Edition

22. Thinking the unthinkable can nullify the Red Queen Effect • Think with your heart and follow with your mind • Be the alternative: turn left when everyone else is turning right Rethinking Marketing, 1st Edition

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24. Five Strategies for Escaping the Red Queen Effect by Altering the Basis of Competition • Lesson 1: Every battle is won before it is ever fought • Draws on military strategy and guerrilla warfare • Strategy is derived from the Greek word strategos, which means the “art of the general” Rethinking Marketing, 1st Edition

25. Lesson 1—cont. • Sun-Tzu, famous general of China, about 2,500 years ago • Wrote The Art of War • All warfare is based on deception • If your enemy is superior, evade him • If angry, irritate him • If equally matched, fight • If not equally matched, split and re-evaluate • Offers very powerful ideas for beating the odds in the game of business strategy Rethinking Marketing, 1st Edition

26. Lesson 1—cont. • Guerrilla marketing warfare strategies are designed to circumvent the need for direct frontal attack • Various tactics • To wear the opponent down over multiple rounds of attack • Aim is not to conquer but to outlast the opponent • Guerrilla forces • Never win wars • Their adversaries often lose them Rethinking Marketing, 1st Edition

27. Lesson 1—cont. • Series of sporadic attacks in short intensive bursts (surgical strike) with five principles • Guerrilla force is divided into small groups that attack the target at its weak points • Through manifold moves in terms of multiple surge-strike-retreat-hide sequences • They preserve their resources • They never attack the enemy’s main force • They use unorthodox methods • They are willing to withdraw quickly and completely Rethinking Marketing, 1st Edition

28. Lesson 1—cont. • Disadvantages are that being this ingenious • Takes time • Energy • Creativity • Playing dirty • Using deception • Using unethical practices in a dog-eats-dog fight • Practical and ethical aspects of guerrilla marketing strategies Rethinking Marketing, 1st Edition

29. Lesson 1—example • The weaker company uses small, intermittent assaults on different market segments held by the stronger competitor, typically through special sales promotions (i.e., often more tactical in nature). Instead of trying to outspend the opposition in head-on competition, the weaker company out-thinks the competitor by crafting a value proposition that hits the sweet spot for a specific target market in a focused, high-impact marketing effort. Rethinking Marketing, 1st Edition

30. Lesson 2: Step backward to go forward • Speed up the rate of response • For the marketer, this means making decisions faster in order to • Get the right product • To the right customer • With the right price • In the right condition • At the right place • At the right time Rethinking Marketing, 1st Edition

31. Lesson 2—cont. • Military strategist Napoleon brought three innovations to the battlefield • Secure a lead over rivals by • Increasing the army’s marching rate and implementing tactics faster than the enemy • Organizing his army into self-contained units that could act quickly, each with specialized skills • Attacking the opponent’s lines of supply to establish a strong stable position by avoiding a head-on fight Rethinking Marketing, 1st Edition

32. Lesson 2—example • It has been noted that market opportunities “have an expiration date, just like a carton of milk. Markets change, and if data is not used within a certain time, it might go sour. The consequences of going to market based on data past its ‘use by’ date are low response rates, wasted money.” Rethinking Marketing, 1st Edition

33. Lesson 3: Ready! Fire! Aim! • “Doing first” is the improvisational mode where the strategist tries out several things and keeps what works • Strategist relies on a process of “enlightened experimentation” when the situation is • Novel • Ambiguous • Complex • Three-step approach to learning • Enactment • Selection • Retention Rethinking Marketing, 1st Edition

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35. Lesson 3—cont. • People cannot be rigid about the right way to do something • Company learns through trial and error in parallel experiments that breed bold action • Requires dynamic visionaries whose belief is unwavering • An approach that is • Proactive • Inquisitive • Venturesome • Persistent Rethinking Marketing, 1st Edition

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37. Lesson 3—cont. • Underlying premise in this approach to entrepreneurial enactment is combining effectual action with • Rational thought • Analytical thought • Causal reasoning • Effectual action is • Situation in which known means are used to create innovative alternatives Rethinking Marketing, 1st Edition

38. Lesson 3—cont. • Entrepreneur’s knowledge is enacted with the explicit purpose of • Expanding the range of alternatives • From the given set of means • Through novel adaptation that resist existing structural conditions • It stresses the importance of • Playfulness • Experimentation • Intuition in strategic action Rethinking Marketing, 1st Edition

39. Lesson 3—cont. • Strategy as improvisation involves • Acting first • Thinking later • Execution is analysis • Implementation is formulation Example • Strategy as improvisation reflects many of the characteristics found in jazz—it strives against the status quo and “business as usual” mentality; it reinvents, re-creates, and rejuvenates; it encourages imagination and freedom within a set of established guidelines; and it embraces the paradoxes that stimulate creative tensions. Rethinking Marketing, 1st Edition

40. Lesson 4: It takes two to pass one • Compete by not competing—compete by cooperating • Co-opetition fast becoming a necessary strategy for long-term sustainability • Independent parties that achieve mutual goals through • Cooperation, which aligns critical activities and processes • At the same time competing with each other • As well as with other firms Rethinking Marketing, 1st Edition

41. Lesson 4—cont. • By partnering with opponents and adhering to “the rules of the co-opetition game” • Each competitor strengthens its overall competitive position • At the same time, it limits the room for maneuvering • It also preempts head-to-head competition Example • It didn’t take Apple long to catch up and “think different” or to do the unthinkable as can be seen in its partnerships with IBM and Motorola for supply of Apple’s computer chips. Rethinking Marketing, 1st Edition

42. Lesson 5: Don’t play hardball—throw a curveball • In today’s complex environment, the strategist has to remove the blinders imposed by the present • Market universe consists of two sorts of oceans • Violent red oceans of bloody competition • Calm blue oceans of uncharted territory Rethinking Marketing, 1st Edition

43. Lesson 5—cont. • Red ocean companies • Companies stuck within perceived industry boundaries • Attempt to outperform competitors through low cost or differentiation strategies built around incremental innovations that keep shrinking profit tools • Blue ocean companies • Avoid head-to-head competition • Challenge the industry’s strategic logic • Challenge taken-for-granted assumptions Rethinking Marketing, 1st Edition

44. Lesson 5—cont. • Blue ocean companies ask “what if?” questions • What if we reduced or eliminated certain factors on the cost-side? • What if we raised or created certain factors on the revenue-side? • What if we combined all four factors (reducing, eliminating, raising, creating) as part of value innovation? Rethinking Marketing, 1st Edition

45. Lesson 5—cont. • These three questions are part of an action framework, one that provides the basic building blocks for • Developing new value curves • New business models • New markets that are uncontested • Ultimate goal of a blue ocean strategy • To own the market by gaining market share as quickly as possible • Making it tough for competitors to enter Rethinking Marketing, 1st Edition

46. Lesson 5—examples • Cirque du Soleil reinvented the notion of a circus and created a radically new form of entertainment modeled around theatrical performances. • Become a champion of ideas. Starbucks re-created the “Italian espresso bar” experience by designing a customer value proposition around freshly brewed espressos, cappuccinos, and lattes served by baristas in the neighborhood café. • Start your own curve instead of staying ahead of the curve (e.g., Southwest Airlines). • The marketer doesn’t always have to predict the future or even create it. Instead, he or she can redefine the present (e.g., Harley Davidson). Rethinking Marketing, 1st Edition

47. Rethink Tool #10 • Use the mind’s eye, myths, memories, mystery, and magic to think metaphorically. Rethinking Marketing, 1st Edition